No, Azim Premji jobs report does not use erroneous data to study employment in India

A worker at a paint factory in Gwalior, Madhya Pradesh | Udit Kulshrestha/Bloomberg

Text Size:

22

Shares

Soumya Kanti Ghosh and Pulak Ghosh recently picked on the State of Working India report, but they misunderstood the study.

Soumyakanti Ghosh and Pulak Ghosh have been advocating the use of Employees’ Provident Fund Organisation (EPFO) data to measure employment in India for a long time now. Their indefatigable energies in doing so are almost touching. They seem to get immediately upset with any other source of data being used to measure employment in the country.

It distils the wisdom of academics who work in this field into well-thought-out themes. It presents the dense subject of labour economics into a lucid commentary that can be easily appreciated by an interested lay person and specialists alike.

Almost every source of data and insights regarding India’s labour markets is covered in this report. All sources have been treated appropriately in the report. Older and more established sources such as the NSSO’s and the Labour Bureau’s Employment-Unemployment surveys as well as the Annual Survey of Industries are covered. This is because these surveys have been around long enough and many researchers have built a body of work around it.

It is very unfortunate that the Quarterly Employment Survey (QES) of the Labour Bureau was effectively discontinued by the government. It was the only enterprise survey available in the country.

All efforts are initially limited in scope, and require time and resources to strengthen. The QES began as a survey to estimate the damage that the global financial crisis of 2008 caused to export industries. Later, its scope was expanded. This is a natural progression. Often, an initiative is a response to a crisis. But, over time it builds its own character as it responds to new needs.

The QES was headed in this direction when it was stopped in its tracks. The sample could be expanded, the questionnaire could be made richer to meet the needs of a larger domain of users and the release could be made faster. But, the government thought differently.

Every major modern economy needs an enterprise survey. Since we have stopped an existing one, a new effort will have to be made. In the process, investments made into the first one and the human capital built in the process would be wasted.

Ghosh and Ghosh are completely wrong in stating, “Even the SWI report uses the QES as its basis”. The SWI uses a lot more than the QES as its basis.

In the article in ThePrint, the Ghosh and Ghosh duo show they do not seem to understand the circumstances in which jobs can shrink and how the unemployment rate can also fall at the same time. They say “unless properly and scientifically designed”, employment surveys “will give wrong results”.

The results are not wrong. Here is the explanation.

During September-December 2016, 406.5 million persons were employed and 29.6 million persons were unemployed. As a result, the labour force (which is the sum of these two) works out to 436.1 million. And, the unemployment rate (which is the unemployed expressed as a per cent of the labour force) works out to 6.8 per cent.

During January-April 2017, the number of employed persons fell to 405.1 million and the number of unemployed fell more sharply to 20.1 million. This sharp fall in the unemployed results in a correspondingly large fall in the labour force. This was down to 425.1 million. As can be seen easily, the sharp fall in the unemployed led to a fall in the unemployment rate.

After the shock of demonetisation, the count of both – employed and unemployed – fell. The sharper fall in the unemployed reflects the greater distress among the unemployed. The people who were unemployed and were looking for jobs earlier stopped looking for jobs post demonetisation because they believed that there were none on offer. There is nothing wrong in the above results as Ghosh and Ghosh seem to suggest. The results reflect the stark fact of India’s labour markets post-demonetisation.

Finally, Ghosh and Ghosh seem to be tilting at the windmills by suggesting that the EPFO data are being dismissed for “pecuniary gains”. It is almost an accusation that a critique is motivated by commercial interests. The Centre for Monitoring Indian Economy (CMIE) is the only commercial organisation in this discussion on employment data, but it is not the only one criticising the use of EPFO data to estimate new jobs. Further, the CMIE makes its unemployment rates estimates freely available as a public good.

Criticisms are most welcome but ascribing motivations is not kosher.

The author is the managing director & CEO, Centre for Monitoring Indian Economy P Ltd (CMIE).

1 COMMENT

If both employment and unemployment decreased, where did the people go? And remember, every month some people are added to the labour force and hence the decrease is more than what the figures suggest.